A senior White House adviser has said the Japanese government should be taking the lead in attempting to solve the bad debt problem in Japan's banking sector.

Last week the Bank of Japan surprised analysts when it said it would step in to assist the country's troubled banks by buying some of their shares.

The banking sector is estimated to be carrying a bad loan burden of about 52 trillion yen ($428bn; �272bn).

But Glenn Hubbard, chairman of the White House Council of Economic Advisers, said the Japanese government needed to get involved.

"I don't yet know all the details of the Bank of Japan proposal, but in and of itself it wouldn't be such a comprehensive treatment of the non-performing loan problem," Mr Hubbard said on Saturday.

"I think the onus is really on the government, as it has been, to say exactly what is its plan for non-performing loan resolution."

Seeking a solution

Announcing the Bank of Japan's plan on Wednesday, the Bank's Governor Masaru Hayami had said the "central bank must consider measures that will help banks reduce risks from their shareholdings".

The move was welcomed by the Japanese Financial Services Minister Hakuo Yanagisawa who said it would "greatly contribute" to reviving Japan's economy.

But Mr Yanagisawa rejected the idea of public funds being put into banks, except in a financial crisis.

"Japan is a major economy of market, and a nation ruled under law," he said.

"I firmly believe, therefore, it is not right to justify the necessity of capital injection in the light of macroeconomic policy."